C HAPTER 40: S UPPLY SIDE POLICIES (SSP)

I NTRODUCTION Does FP & MP affect AD. or AS? *Do Getting started p 181 SSP’s are used to ↑ AS. in an economy, i.e. ↑ the supply of G & S. How could the productive capacity (PPC or AS) of an economy be improved? Brainstorm

1. L ABOUR MARKET REFORMS The govt. tries to ↑ the productivity of labour by; 1. Improve flexibility by ↓the strength of trade unions no ‘closed shops’ i.e. no compulsory membership secret ballots allowed no fixed wages (  MW) 2. Restore incentives : i.e. ↓ income tax so people want to work more 3. ↑ the quality of labour ; i.e. better education & training. Also ↑ females & elderly workers *Do Q 1 P.183

2. P RODUCT M ARKETS The govt. tries to ↑ the efficiency of G & S production by; 1. Privatisation (see ch. 29) 2. Deregulation: less rules, laws so doing business is easier, e.g. airlines 3. Helping small firms by ↑ competition, ↓ monopoly/ oligopoly (review: benefits of competition Ch. 22) ↓ taxes for them Tax allowances for small business investors Free advice service * Do Q2 P184

3. C APITAL M ARKETS i.e. the market for investment. Stocks & bonds. Where firms & the govt. can raise capital. The government can do any of the following to ↑ investment in a country 1. Invest in infrastructure e.g. transport, communications, to make doing business easier 2. Having a stable economy, i.e. no booms/ busts, so firms are sure about future 3. ↑ education/ training

S OME MEASURES TAKEN BY UK GOVERNMENT IN REGARDS TO THE CAPITAL MARKET ↓ co. tax as a lot of investment is made from profits Let firms offset investment spending against tax Tax relief for individuals investing in shares zib4johttps:// zib4jo (6:00) Exam practice